Agreement was expected to contribute nearly half of the public funding for planned overhaul of New York Penn Station

The chairman of the Port Authority of New York and New Jersey suggested his agency might scrap a 15-year-old agreement that was expected to contribute nearly half of the public funding for a planned overhaul of New York Penn Station.

John Degnan, the chairman, also said the Port Authority’s lease for a tiny spot inside a vast post-office building next to the train station stemmed from a conflict of interest on the part of a previous...